It’s time to buy agricultural commodities.
The Invesco DB Agricultural Commodity Fund (DBA) – an exchange-traded fund (ETF) made up of 17 different agricultural commodities – has been a miserable investment in 2020. DBA started the year at $16.50 per share. That was the high point. The fund closed Wednesday at $13.40.
I suspect that may mark the low point – or something darn close to it – because the stunning 20%+ decline since the start of the year has actually created a bullish-looking pattern on the chart. Take a look…
The action over the past month has formed a “bullish falling wedge” pattern on the chart. This happens as a stock makes lower highs and lower lows, and where the distance between each high and low shrinks. DBA is now approaching the apex of the wedge. So, it’s likely to break out, one way or the other, within the next few days.
All the various technical momentum indicators at the bottom of the chart have been rising even as the price of DBA has been falling. This “positive divergence” is often an early warning sign that the current downtrend is losing momentum and is getting ready to reverse.
It looks to me like the next big move in DBA will be to the upside. And, that move should happen soon.
The most obvious upside target is the top of the wedge pattern at about $14.60 or so. That’s $1.10 per share higher than where the stock closed yesterday – which would be a gain of about 8%.
Traders who are looking for a low-risk setup, with solid upside potential, should consider DBA right here. It’s one of the best-looking trade setups in the market today.
Best regards and good trading,
Editor, Market Minute